Today, Tuesday, August 19, 2008 marks another down day for the DOW JONES Industrial Average and, if you are keeping track, it is more than 500 points down from its intraday high of only half-a-month ago. My advice: remain diversified and continue to stay invested in stocks in the same proportion that made sense for your time horizon when it was at 14,000 last October. The markets will recover.
This blog entry is about a different kind of resizing rather than stock markets. I recently compared a roll of toilet paper bought last week with a roll purchased months ago and it is about a quarter-of-an-inch smaller in width. That is about 5% less paper. Companies continue to do this as effective cost cutting measures with many products, resize them, and the consumer rarely notices.
A variety of granola bars are also getting smaller (but still packaged in the same size wrapper). Cereal boxes have been getting smaller, too. Soda cans have been "necking down" the tops for years in an attempt to reduce the coatings used on the inside tops of soda cans because it is an expensive method. At least this is not delivering less product to the consumer but it is another type of resizing of America to reduce costs and maintain company profit margins without reducing employees or wages.
Have you noticed packages getting smaller or their contents?
Another area of the "Resizing of America" is going the other way. Houses in the 1950's were not much more than 1,200 square feet but the average house today is over 2,400 square feet. Yet another, automobiles. They have so many new features (air bags, automatic braking systems, separate heating and air-conditioning, etc.) that it is very difficult to just compare the cost of a car in 1950 with one today and attribute it to inflation. No, there is a positive side to this resizing of America, too. Better quality. The average cost of a car increases about 7% per year - way more than inflation of 3.2% - to make up for these additions to quality.
Keep this in mind as you prepare your retirement portfolio. Inflation is only part of the picture, the resizing of products (in some cases requiring you to buy more often) and the resizing by adding quality (replacing cars for example) have to be factored in to your future purchasing power.
An Introduction
Hi. Welcome to BourGroup and my blog. Phil
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.
Phil Bour is a CERTIFIED FINANCIAL PLANNER(tm) professional since 2004, a Magna Cum Laude college graduate and an accounting professional for over 35+ years. I love numbers, statistics and economic history.
I am also an Enrolled Agent (EA) to represent taxpayers before the Internal Revenue Service and to prepare tax returns.
"Phil"osophy: I believe that you can manage your money on your own (not necessarily through individual stock selection but through mutual funds, ETF's and other solutions) once you receive some one-time, professional guidance. Why pay annual fees when there may be little added value? For additional information, first read the "An Introduction" label at the left. Then move on to others.